2013-02-16

Nine [Dollars] Is A Magic Number

There is one question I would like to see some reporter ask Alan
Krueger, the president's chief economist: How did they decide that $9
per hour is the right level? Why not $10 or $12 or $15 or $20?
Presumably, the president's economic team must believe that the adverse
employment effects become sufficiently large at some point that further
increases are undesirable. But what calculations led them to decide
that $9 strikes the right balance?

From his chair in Boston, Massachusetts, it is probably difficult for him to understand the political genius behind a $9 minimum wage. It is incumbent on someone who lives in Utah, or Montana, or Oklahoma, or... Texas... to point out why Obama would like to set the minimum wage at $9 instead of >$10. So let's get to it.

Consider this useful link from the US Bureau of Labor Statistics, which provides the following tables, showing metropolitan and non-metropolitan data for cashiers:

Metropolitan areas with the highest employment level in this occupation:

Interesting. Only one region shows a mean hourly wage above $9, and that is a the non-metropolitan region of Michigan that is nearest to Detroit, Ann Arbor, and Toledo.

A deeper dive into the BLS data reveals that California's mean hourly wage for cashiers is $9.81, while that of South Carolina is $8.67. The mean hourly wage for cashiers in New Jersey is $9.16; in Nebraska it is $8.79. In Massachusetts it is $9.57, while in Missouri it is $8.86.

There certainly does seem to be something magical about $9 per hour. It seems that highly populated, metropolitan, left-leaning regions of the country - those with existing "living wage" laws, for example, will be unaffected by the impending unemployment that comes with a rise in minimum wage.

On the other hand, sparsely populated, rural, right-leaning regions of the country will suffer greater unemployment as a result of this law and will be, cruelly, politically impotent against it.